Massage Therapists v INTU: Judge Declares Non-Compete Clause Unenforceable
The ongoing lawsuit pitting eight massage therapists against their former employer, Las Vegas-based INTU Corporation, has seen the first preliminary decision rendered by the presiding judge declaring INTU’s non-compete clause, on which much of its defense and counterclaims are predicated, to be overbroad and unenforceable.
Presiding US District Judge Miranda M. Du filed her partial opinion in response for plaintiff’s motion for a summary dismissal of counterclaims made by INTU Corporation and its founder, Deanne Edwards. Currently, eight former INTU massage therapists are plaintiffs in the lawsuit also alleging violations by INTU of the United States’ Fair Labor Standards Act (FLSA).
Today’s ruling by Judge Du grants a motion on behalf of the eight plaintiffs — Krystal Johnson, Shannon DeLelle, Crystal Honeck, Dusty Dangerfield, Jennifer Wakuzawa-Kida, Sarah Pascoe, Elizabeth Spangler, and Shannon Thompson — to dismiss breach-of-contract counterclaims subsequently filed by INTU.
Judge Du dismissed one facet of INTU’s counterclaim, the non-compete clause inserted unilaterally into its independent contractor agreements (ICAs), as being “unreasonable and overly broad”. Du dismissed that portion of INTU’s claim with prejudice, meaning it cannot be reintroduced at a later date. Regarding that unreasonableness, Judge Du wrote the following:
“[T]he noncompete clause that Defendants seek to enforce as one way to establish the breach element of their breach of contract claim is unenforceable because it is unreasonable and overly broad. As written, it prevents Plaintiffs from working for any of INTU’s customers, such as the Bellagio, while they work for INTU and for one year thereafter—regardless of the job Plaintiffs might want to take at, say, the Bellagio. … As Defendants tacitly acknowledge [case citation], the noncompete clause would prevent Plaintiffs from taking a job at the Bellagio as a custodian. That ‘is overly broad, as it extends beyond what is necessary to protect [INTU’s] interests.'”
A related section of Du’s dismissal of INTU’s counterclaims involves whether the attempts by the therapists to seek employment at the Bellagio in December, after INTU had lost its service contract there, caused INTU to lose a possible chance to regain the Bellagio gig at a later date. INTU maintains that the therapists damaged INTU by seeking ongoing employment at the O and possibly other properties formerly contracted with INTU.
Judge Du also dismissed INTU’s counterclaims on this element but, duly noting the problems with the way this counterclaim was introduced into the dispute, granted INTU a 30-day extension to revise this portion of its countering claim. Du wrote this in providing her rationale:
Plaintiffs argue that Defendants cannot establish damages as a matter of law because Defendants allege they were harmed by Plaintiffs after Defendants had already lost their contract with the Bellagio.  Defendants counter that their competitor was given a 90 day trial period by the Bellagio after the Bellagio declined to renew its contract with Defendants, and then the Bellagio was going to give them an opportunity to re-bid for a new contract after those 90 days—but the Bellagio never did because Plaintiffs continued to work at the Bellagio through Defendants’ competitor.  Plaintiffs reply that this 90 day trial period is not mentioned in—and therefore not part of—Defendants’ counterclaim, and thus Defendants have effectively conceded Plaintiffs’ Motion should be granted because Defendants need the allegations about the 90 day trial period for their breach of contract claim to survive dismissal.  The Court agrees with Plaintiffs.
Defendants’ counterclaim contains no factual allegations regarding this purported 90 day trial period. But it does contain the allegation that INTU was “unable to renegotiate and retain its contracts with its customers” as result of Plaintiffs’ actions.  The difference between the allegation included in Defendants’ counterclaim and the allegations regarding the 90 day trial period in Defendants’ response to Plaintiffs’ Motion illustrates the difference between conceivable and plausible allegations. As actually alleged in their counterclaim, the damages element of Defendants’ breach of contract claim is merely conceivable—and therefore must be dismissed.  With the extra facts provided in Defendants’ briefing, Defendants’ claim moves towards plausible. However, because those facts tending to show plausibility appear only in Defendants’ briefing, but are nowhere in their counterclaim, Defendants have effectively conceded their counterclaim is insufficiently pleaded. Thus, the Court will grant Plaintiffs’ Motion and dismiss Defendants’ counterclaim.
INTU has until June 9, 2019 to revise its counterclaim regarding the alleged 90-day re-up window, with Judge Du declining to opine on the obvious causality issue at this time. Judge Du is seemingly unlikely to accept hearsay — “I was told such-and-such” regarding the supposed 90-day window, without firm evidence that has yet to be introduced… and even if it exists, may or may not be impactful. Morever, regarding who is responsible for supposed damages, Judge Du has yet to apply all such claims and evidence to the plain facts of the situation: the Bellagio was unwilling to continue its contractual relationship with INTU, yet sought to begin a new working relationship with many of the former third-party-contractor therapists once working for the company.